Australia’s 5% Deposit Scheme: A Fast Track to Housing Stress?
A staggering 76% of a nurse’s income in Sydney could be swallowed by mortgage repayments under the federal government’s expanded 5% deposit scheme, new analysis reveals. While hailed as a pathway to homeownership, the reality for millions of Australians – particularly those in essential professions – is a looming affordability crisis that could worsen, not alleviate, the nation’s housing woes.
The Illusion of Affordability: Digging into the Numbers
The scheme, designed to cut the deposit saving time from over a decade to just two or three years, is facing increasing scrutiny. Data compiled by the Parliamentary Library and commissioned by the Greens paints a stark picture: for the vast majority of Australians in the top 10 most common professions, including nurses, teachers, and sales assistants, homeownership under the scheme would result in crippling mortgage stress. The core issue isn’t access to finance, but the sheer cost of repayments relative to income. As of March, CoreLogic data shows the average household needs 10.5 years to save a 20% deposit – a benchmark the 5% scheme aims to circumvent, but potentially at a dangerous cost.
Profession by Profession: Who’s Most at Risk?
The impact varies significantly by occupation and location. A sales assistant, the largest occupation in Australia, earning an average of $71,350 annually, would find Sydney homes entirely unaffordable, with repayments exceeding their entire wage by 39%. Even in Hobart, the most ‘affordable’ capital city for this profession, repayments would consume nearly half (49%) of their income. School teachers fare slightly better, but a median house in Sydney would still claim 87% of their earnings. Personal carers and assistants face an even more dire situation, with repayments potentially exceeding 122% of their annual income. This isn’t about enabling homeownership; it’s about pushing essential workers into unsustainable debt.
Beyond First Home Buyers: A Systemic Problem
Experts argue the focus on first home buyers is a distraction from the fundamental issues driving the housing crisis. Independent economist Saul Eslake points out that schemes like this simply “reshuffle the queue” without addressing the underlying supply and demand imbalance. He highlights that a multitude of policies – from stamp duty concessions to tax breaks for investors – contribute to inflated house prices, and that politicians on both sides are incentivized to maintain, rather than solve, the crisis due to the large homeowner and investor voting blocs. The scheme risks exacerbating competition, driving up prices further, and ultimately locking more people out of the market in the long run.
The Role of Investors and Policy
The current system disproportionately benefits investors, with policies often favoring property speculation over genuine homeownership for essential workers. Cutting tax breaks for wealthy property investors, as suggested by the Greens, and significantly increasing investment in social and affordable housing are frequently cited as crucial steps towards a more equitable system. However, these solutions face political headwinds, as they challenge the interests of a powerful electorate.
The Future of Housing Affordability: What’s Next?
The expansion of the 5% deposit scheme, coupled with a broader lack of systemic reform, suggests a future where homeownership becomes increasingly unattainable for a growing segment of the population. We can anticipate a continued rise in household debt, increased housing stress, and a widening gap between those who own property and those who don’t. The current trajectory points towards a two-tiered system, where homeownership is reserved for the affluent, while essential workers are relegated to a lifetime of renting or unsustainable mortgages. The recent increase in first home buyer loans – up 3.8% to 125,036 in the year to March 2025, largely driven by these schemes – may prove to be a short-term boost masking a long-term deterioration in affordability.
A more sustainable solution requires a multi-pronged approach: increased housing supply, particularly social and affordable housing; reforms to negative gearing and capital gains tax; and a shift in political priorities towards prioritizing the needs of renters and essential workers over the interests of property investors. Without such fundamental changes, the dream of homeownership will remain out of reach for millions of Australians.
What are your predictions for the future of housing affordability in Australia? Share your thoughts in the comments below!
